AP, Intellect ink MoU for Fab facility in Hyd

Govt to shoulder interest component, with upper limit of Rs 35 cr a year

The decks have been cleared for the first ever Fab facility at a total investment of $600 million in the country today. The Andhra Pradesh government today signed a memorandum of understanding (MoU) to this effect with the Korea-based Intellect Inc.

As per the MoU signed, the state government has offered to shoulder an interest component, with an upper limit of Rs 35 crore a year for 10 years for the Fab facility (phase-1), which is expected to come up near the new Hyderabad International Airport in Shamshabad and will be completed by December 2005.

June Min, the company chairman and J C Mohanty, principal secretary of the IT department today signed an MoU in the presence of chief minister Y S Rajasekhara Reddy to this effect for the proposed first ever semiconducter Fab manufacturing unit in the country.

Apart from the loan servicing, the state government has also committed to allot 50 acres of land at Shamshabad near Hyderabad on a 30-year lease, free of cost, besides providing high quality power and water. The plant is expected to require about 35 mw of power a day.

According to government sources, the loan servicing has been offered keeping in mind the $80 million investment on the basic infrastructure like buildings to be made by Intellect, which would then hand over the facilities to the government after the expiry of the lease period. The government's commitment on sharing the interest burden, almost Rs 350 crore in 10 years, and the investment made by Intellect are almost the same.

Speaking on the occasion, chief minister Y S Rajasekhara Reddy said that a lot of ancillary industries are expected to come up around the project, providing more employment opportunities to the local people.

Out of the total investment, about $450 million is expected to be brought in by the foreign investors and around $160 million would be arranged from domestic sources. Out of this, again, the state government has agreed to support the company in raising around $80 million by way of central assistance or bank loans, officials told Business Standard.

The phase-1 facility will have a capacity of 30,000 wafers per month. The Fab will initially start with 0.35 µm (sub micron) three and/or four metal layers of 10,000 wafers per month and then it will be extended to 0.25 µm five metal layers of 20,000 wafers per month.

The Fab facility will establish technology partners and captive customers and allocate up to 60 per cent of the capacity for them. The remaining 40 per cent of the capacity will be offered on a shared basis to other players.

The phase-1 facility is expected to create employment for about 2,000 people. The promoters will have $150 million equity in the project. The second phase, with an investment of a whopping $2 billion, is proposed to be taken up in 2008.